Gold now trades close to 8% below the all-time high. Investors are now wondering whether the yellow metal has lost momentum or if it is consolidating and waiting for the next phase of the bull run.
After posting one of the most successful first quarters in close to five decades, Gold’s price has skidded by 8% from the all-time high of $3,505 to the current price of $3,250. And now the yellow metal sits at critical crossroads.
It has investors wondering whether the bullish momentum that pushed it to a record price is fading or if it is catching its breath before the next big move.
Gold’s Current Market Context
Gold’s cooling-off price action may be attributed to a number of factors. First is the positive developments in international trade relations, especially the truce between the US and China.
The declining prices may also be attributed to the easing geopolitical tensions, including a ceasefire between Russia and Ukraine and a meeting between the presidents of the two countries. Meanwhile in South Asia, leaders in Pakistan and India have agreed to a US mediated ceasefire as well.
Not forgetting a stronger dollar and better-performing stock and crypto assets like Bitcoin, which has reduced the demand for the safe haven asset.
Key Technicals and Price Level to Watch
At the time of writing, Gold is testing the critical support of $3,200, which aligns with the 50-day EMA and April’s indecisive price action.
It faces major resistance around $3,350, and only a break above this level can confirm an end to the consolidation phase and resumption of the bull rally that may warrant an investment in Gold.
Key technical indicators confirm Gold’s consolidation phase. The RSI, for instance, has slumped from the overbought region to the neutral but slightly bullish zone of 50. The MACD indicates a bearish crossover, which hints at a possible weakening of the short-term momentum.
Is Gold Gathering Steam or Has it Lost Momentum
Looking at the macroeconomic environment and Gold’s technicals, it is clear that the yellow metal hasn’t lost momentum. It is simply taking a healthy break after an aggressive rally that saw it set a new price record.
Watch out for a break above $3,500 as it would signal the resumption of the rally. However, if Gold’s price slips under the $3,200 support, it may clear the path for further downside in the weeks ahead.
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